Growing Apart

Oil, Politics, and Economic Change in Indonesia and Nigeria

Peter M. Lewis

Publication Year: 2007

Growing Apart is an important and distinguished contribution to the literature on the political economy of development. Indonesia and Nigeria have long presented one of the most natural opportunities for comparative study. Peter Lewis, one of America's best scholars of Nigeria, has produced the definitive treatment of their divergent development paths. In the process, he tells us much theoretically about when, why, and how political institutions shape economic growth. —Larry Diamond, Senior Fellow, Hoover Institution "Growing Apart is a careful and sophisticated analysis of the political factors that have shaped the economic fortunes of Indonesia and Nigeria. Both scholars and policymakers will benefit from this book's valuable insights." —Michael L. Ross, Associate Professor of Political Science, Chair of International Development Studies, UCLA "Lewis presents an extraordinarily well-documented comparative case study of two countries with a great deal in common, and yet with remarkably different postcolonial histories. His approach is a welcome departure from currently fashionable attempts to explain development using large, multi-country databases packed with often dubious measures of various aspects of 'governance.'" —Ross H. McLeod, Editor, Bulletin of Indonesian Economic Studies "This is a highly readable and important book. Peter Lewis provides us with both a compelling institutionalist analysis of economic development performance and a very insightful comparative account of the political economies of two highly complex developing countries, Nigeria and Indonesia. His well-informed account generates interesting findings by focusing on the ability of leaders in both countries to make credible commitments to the private sector and assemble pro-growth coalitions. This kind of cross-regional political economy is often advocated in the profession but actually quite rare because it is so hard to do well. Lewis's book will set the standard for a long time." —Nicolas van de Walle, John S. Knight Professor of International Studies, Cornell University Peter M. Lewis is Associate Professor and Director of the African Studies Program, Johns Hopkins University, School of Advanced International Studies.

Cover

Frontmatter

Contents

Acknowledgments

Chapter 1. Introduction

What types of institutional arrangements are essential for economic
growth in poor countries? What are the political conditions that foster the
development of growth-inducing institutions? Although there is a good
deal of consensus about the institutions generally needed for prosperity
over the long term, we have much less certainty about the conditions for
economic progress in poorly performing states, or in circumstances...

Chapter 2. The Political Economy of Development

This study is concerned with the effects of institutional arrangements on
economic growth and the political factors leading to institutional change.
The central argument is that differences in long-term economic performance
are determined by variations in the ability of states to make credible
commitments to market participants. Such commitments include policy
stability, secure property rights...

Chapter 3. Growing Apart Divergent Political Economies

Indonesia and Nigeria offer natural comparisons as well as marked contrasts.
With populations currently estimated at 242 million and 134 million,
respectively, they are large countries with crucial positions in their
subregions. Indonesia encompasses an archipelago of some 16,000 islands
stretching over 3,000 miles from the Pacific to the Indian Oceans. The
country accounts for about 40 percent of the total population among...

Chapter 4. Indonesia Crisis, Reform, and Growth

Between 1966 and 1996 a widening gap appeared in the relative economic
performance of Indonesia and Nigeria. Much of the variation can be
explained by distinct economic policies that evolved in different political
and institutional settings. This chapter and the next one summarize the
critical periods of political and economic change for each state. After providing
a brief historical prelude for each country...

Chapter 5. Nigeria Division, Distribution, and Decline

Nigeria’s policy regime and the country’s evolution within the global economy
differed substantially from those of Indonesia. Nigerian elites
responded to different incentives, exacerbating the weaknesses of the rentier
economy and avoiding needed adjustments in response to exogenous
shocks. With the arrival of the initial petroleum windfall, Nigerian leaders
pursued a set of policies that intensified the macroeconomic distortions...

Chapter 6. Comparing Economic Performance

In the preceding analysis, I have drawn the linkages between institutional
choice, policy selection, economic performance, and structural change,
which affect the path of development over time. The empirical record of
comparative economic performance in Indonesia and Nigeria helps to
clarify and underscore these factors. In this chapter I assess relative performance
in growth, income, the structure of the economy...

Chapter 7. After the Fall The Dynamics of Attempted Reform in Indonesia

The diverging paths of Indonesia and Nigeria abruptly changed course on
the eve of the millennium. In the throes of the Asian financial crisis, Soeharto’s
regime collapsed in May 1998, and with it the growth coalition
forged by the New Order over a period of decades. Political reforms led to
a fledgling democratic regime the following year, against a backdrop of
economic decline, social turmoil, and institutional disarray. Almost simultaneously,
Nigeria experienced momentous political change...

Chapter 8. Predatory Rule, Transition, and Malaise in Nigeria

Nigeria’s political and economic conditions in the late 1990s differed substantially
from those of Indonesia. In marked contrast to Indonesia’s
decades of growth and economic diversification, Nigeria developed an oil
monoculture in which virtually all foreign exchange, and the preponderance
of government revenues, were derived from crude oil exports.1 In consequence,
the political economy was overwhelmingly concentrated on the
distribution of rents...

This book offers a perspective on the political challenges of economic development.
The problems of uneven development among regions and states
have given rise to many questions about the conditions needed for sustained
growth and competitiveness. Analyses of economic growth have increasingly
centered on institutional factors, including the character of markets
and the qualities of states in providing economic governance...

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